Fulton County Property Tax Base Forecast, 2015-2020...Fulton County Property Tax Base Forecast, 2015-2020 Prepared by the Center for State and Local Finance at Georgia State University

Fulton County Property

Tax Base Forecast,

2015-2020

Prepared by the Center for State and Local

Finance at Georgia State University

February, 2015

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US and Atlanta Economic Climate and Property Market

The US housing market has made steady returns since the housing bubble burst mid-2007. In

2014, new housing construction increased by almost 9 percent, and the construction of single-

family homes reached a level not seen since March 2008. 2014 saw 1.1 million new buildings

constructed, which, although still down sharply from a peak of 2.3 million in January 2006, is up

sharply from a recession trough of just 500,000.1 Finally, housing prices saw a 6.4 percent year

over year increase in October 2014.2 However, the continuation of growth in the housing market

has slowed down somewhat after stronger growth in 2012 and 2013, as the post-crisis rebound is

has slowed. Notably, the housing market is still down from pre-crisis levels.

The tepid housing recovery has been boosted by low interest rates, which means cheaper

borrowing costs for homebuyers. In fact, mortgage-finance company Freddie Mac reported a

steep drop in mortgage rates in early January 2015. The average rate on a 30-year fixed-rate

mortgage reached 3.66 percent, and the rates on 15-year fixed mortgages dropped below 3

percent, the lowest levels since May 2013.3 In theory this should stimulate the housing market in

2015. However, in reality, sales have not responded as enthusiastically as predicted, as tight

mortgage-qualification standards, and greater demand for cheaper, older homes over newer,

more expensive ones are believed to have restrained demand for housing. Some economists

expect the US housing market in 2015 to mirror developments in 2014, displaying growth, albeit

increasingly slow. An additional threat on the horizon is the expected increase in interest rates by

the Federal Reserve in the middle of 2015. This is expected to raise mortgage rates, which would

depress home buying and the US housing market.

Still, other economists are optimistic about the expected performance of the US housing market

in 2015. Stronger job and income growth, and greater consumer confidence are expected to allow

greater savings and household formation among younger Americans, putting them in a better

position to purchase homes.4 This is expected to particularly benefit those areas of the country

where housing prices are lower, such as the South.5 The sharp drop in oil prices, from $101 in

June 2014, to just under $48 today is expected to contribute to these economic trends, by putting

more money in the pockets of US consumers, and boosting consumption. Although the lower

price of oil is negatively impacting housing markets in oil-producing states, Atlanta is expected

to benefit from the price drop.6

In the past two years, Atlanta has experienced both some job and personal income growth, as the

Metro Atlanta area has continued to recover from the economic crisis. Atlanta’s unemployment

rate has dropped from 8.8 percent in 2012, to 7.9 percent in 2013, and 7.1 percent in 2014. This

trend is expected to continue in 2015, with the unemployment forecast falling to 6.3 percent.

Real personal income has improved as well from the lows experienced in 2009 and 2010. 2014

saw a 2.7 percent increase, and 2015 is expected to bring 3.8 percent growth in personal

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incomes. These positive economic trends are likely to have a beneficial impact on the metro

area’s housing market.

The housing market recovery in Metro Atlanta counties has been mixed over the past years. The

entire Metro Atlanta area has seen an estimated 4 percent growth in total housing permits issued

in 2014, and this is expected to increase to 5.4 percent in 2015. The situation in Fulton County,

however, is slightly different. Fulton County has historically produced most of the region’s

multifamily housing units. However, permits for these units experienced a sharp downturn,

declining 56.5 percent and 3 percent respectively in the third and fourth quarters of 2014,

compared to a year earlier. Single-family housing permits have seen growth of 15 percent and 25

percent during those same quarters when compared to 2013. Total housing permit growth in

Fulton County in 2015 is predicted to decrease by some 3.6 percent. While single-family housing

permits are expected to grow by 4 percent, multifamily housing will face a 7.4 percent decline.7

The Atlanta Regional Commission (ARC) expects the slow growth in permits to put upwards

pressure on housing prices, as new supply will remain limited in 2015.

After bottoming out in March 2012, housing prices have increased in the past years throughout

the Metro Atlanta region. The Atlanta board of Realtors noticed a 9 percent jump in metro area

housing prices in 2014, as well as increases in housing inventory.8 In Fulton County, however,

housing prices increased by 3.3 percent, from an average of $241,175, to $249,082, between July

2013 and July 2014. This represents the fifth worse performance out of the 20 Metro Atlanta

counties.9 The Case-Schiller Index indicates that even after almost one and a half years of

recovery, as of August 2014, housing prices in Atlanta were still 12.5 percent lower than the

August 2007 pre-crisis peak. Additionally, Atlanta housing prices have declined by half of a

percent between August and October of last year.

The Metro Atlanta housing market has markedly improved over the last few years, and is doing

better than most other hard hit urban areas in the US. However, it has yet to fully recover from

the mortgage crisis.

Forecasting methodology and data

The data used to forecast the assessed values is from the Georgia Department of Revenue Local

Government Services property tax consolidated sheets. Data from 2000-2014 was used to

perform the analysis for Fulton County. Data from 2008-2014 was used to perform the analysis

for the South Fulton Special Services District (SSD).

The data was broken down by type of property, including residential, commercial, industrial,

utility, motor vehicle, and other, to allow each type of property to be considered separately. For

instance, because of the implementation of the Georgia Title Ad-Valorem tax (TAVT), the

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growth in the value of motor vehicles in the tax base is declining as more vehicles come off the

traditional property tax rolls. Furthermore, industrial property is subject to assessment based on

the income generated from the use of that property, while commercial and residential properties

are based on their market value. Lastly, the category of other property includes agriculture,

timber, motor homes, historical, conservation use, forest conservation use property and

brownfield property.

In addition, the data by type of property was also grouped by three areas of the county. These

areas were North Fulton which consisted of the municipalities of Alpharetta, Johns Creek,

Milton, Mountain Park, Roswell and Sandy Springs. The second area included the tax

jurisdiction of Atlanta. The South Fulton area included the South Fulton SSD and the

municipalities of the County south of Atlanta. Because not all types of property are distributed

evenly throughout the county, considering each type of property based on these geographic areas

allows the forecast to reflect the uneven growth patterns that occur among areas of the county

and among property types.

Future values of the property types were forecasted based on a combination of historical growth

patterns and in the case of residential and commercial properties, the forecasted values of

additional variables from Moody’s Analytics. The residential forecast is based on a 5 year

moving average of the median existing single family home price. The commercial forecast

based on an adjusted 5 year moving average of an index of private non-residential construction

put in place. Industrial property is based on the historical patterns of growth and decline over the

2000-2014 period and future expectations of economic recovery. Utility property is estimated as

a constant percent of the gross digest less utilities. Motor vehicles is forecasted to decline to zero

by 2020 due to the implementation of the TAVT. The value of exemptions is forecasted using a

linear trend model for both the M&O exemptions and the bond exemptions.

The forecast of the assessed value by property type for Fulton County is shown in Table 1. The

forecast of the assessed value by property type for the South Fulton SSD is shown in Table 2.

Summary statistics for both forecasts are shown in the following section in Tables 3 and 4, along

with Figures 1-4 showing the net M&O and net bond digest from 2000-2020 and the gross digest

by residential, commercial, and all other property for 2000-2020.

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Table 1. Forecast of Net Assessed Value for Fulton County

Net Assessed Value

CY2015 CY2016 CY2017 CY2018 CY2019 CY2020

Residential 28,024,059,745 30,629,391,496 33,468,191,948 35,052,717,950 36,085,877,447 36,841,258,793

Commercial 22,797,833,226 25,240,452,495 27,781,795,888 29,172,878,018 29,887,526,080 30,056,200,055

All Other 4,457,603,900 4,301,918,871 4,043,697,107 3,690,206,930 3,533,053,051 3,532,370,842

Gross Digest 55,279,496,871 60,171,762,862 65,293,684,943 67,915,802,898 69,506,456,579 70,429,829,689

Exemptions M&O 8,389,991,977 9,322,597,458 10,322,419,748 10,951,506,534 11,427,576,864 11,801,881,375

Exemptions Bonds 3,374,274,647 3,710,203,689 4,066,501,735 4,271,912,526 4,415,055,819 4,517,371,982

Net M&O 46,889,504,894 50,849,165,404 54,971,265,195 56,964,296,364 58,078,879,715 58,627,948,314

Net Bonds 51,905,222,224 56,461,559,174 61,227,183,208 63,643,890,372 65,091,400,760 65,912,457,707

Table 2. Forecast of Net Assessed Value for South Fulton Special Service District

Net Assessed Value

CY2015 CY2016 CY2017 CY2018 CY2019 CY2020

Residential 1,406,268,257 1,620,583,540 1,770,782,844 1,854,619,206 1,909,283,082 1,949,249,876

Commercial 1,469,713,176 1,552,017,114 1,606,337,713 1,654,527,845 1,687,618,402 1,697,142,686

Other 796,492,090 815,678,830 787,596,459 749,635,650 762,560,549 786,391,370

Gross Digest 3,672,473,524 3,988,279,485 4,164,717,016 4,258,782,701 4,359,462,033 4,432,783,932

Exemptions M&O 918,947,904 997,970,727 1,042,119,963 1,065,657,631 1,090,850,205 1,109,197,242

Exemptions Bonds - - - - - -

Net M&O 2,753,525,620 2,990,308,757 3,122,597,053 3,193,125,070 3,268,611,828 3,323,586,690

Net Bonds 3,672,473,524 3,988,279,485 4,164,717,016 4,258,782,701 4,359,462,033 4,432,783,932

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Summary Statistics for Fulton County Forecast

Table 3 shows the compound annual growth rates for assessed values of residential property,

commercial property and all other property for the Fulton County tax base. Over the 2006-2014

period, the assessed value of residential property in the county tax base fell by 0.21 percent

annually on average. Negative growth rates in the residential base in the southern parts of the

county were somewhat offset by lower and much less negative growth rates in other parts of the

county. Over the 2015-2020 period, the residential housing market is forecasted to have a

compound annual growth rate of 5.62 percent due to the recovery of the residential housing

market. The commercial property market in the county experienced a 3.26 percent annual

growth over the 2006-2014 period. It is forecasted that commercial property in the county will

experience a 5.68 percent annual growth over the 2015-2020 period. The category of all other

property is forecasted to decline by 4.55 percent over the 2015-2020 period. This is due to the

elimination of motor vehicles from the property tax rolls. The forecast assumes that by 2020 the

county will receive no revenue from the ad valorem taxation of motor vehicles. Exemptions are

forecasted to grow at a rate of almost 5 percent annually. This rate of growth is largely driven by

the overall rate of growth in property values in the county base.

Table 3. Summary Statistics for Fulton County

Fulton County Assessed Value

Compound Annual Growth Rates

2006-2014 2015-2020

Residential -0.21% 5.62%

Commercial 3.26% 5.68%

All Other 0.42% -4.55%

Gross Digest 1.14% 4.96%

Net Digest M&O 0.35% 4.57%

Net Digest Bond 1.54% 4.89%

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-

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

50,000,000,000

60,000,000,000

70,000,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 1. Fulton County Net Digest, 2006-2020

Net Digest - M&O Net Digest - Bond

-

5,000,000,000

10,000,000,000

15,000,000,000

20,000,000,000

25,000,000,000

30,000,000,000

35,000,000,000

40,000,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 2. Fulton County Property by Type, 2006-2020

Residential Commercial All Other

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Summary Statistics for South Fulton Special Service District Forecast

Table 4 shows the compound annual growth rates for assessed values of residential property,

commercial property and all other property for the South Fulton County SSD tax base. Over the

2008-2014 period, the assessed value of residential property in the county tax base fell by 7.58

percent annually on average. Over the 2015-2020 period the residential housing market is

forecasted to have a compound annual growth rate of 6.75 percent due to the recovery of the

residential housing market. The annual growth of the South Fulton SSD residential market is

forecasted to exceed that of the county as a whole because of the tremendous declines

experienced by this area during the recession. The commercial property market in the SSD

experienced a 2.4 percent annual decline over the 2008-2014 period. It is forecasted that

commercial property in the county will experience a 2.92 percent annual growth over the 2015-

2020 period. The category of all other property is forecasted to decline by 0.25 percent over the

2015-2020 period. This is due to the elimination of motor vehicles from the property tax rolls.

The forecast assumes that by 2020 the county will receive no revenue from the ad valorem

taxation of motor vehicles. Because industrial and utility property is a much larger share of the

other property category of the SSD tax base, the eventual elimination of motor vehicles from the

SSD tax base does not have the same overall negative effect that it has on the other property

category for the county as a whole.

Table 4. Summary Statistics for South Fulton SSD

South Fulton SSD Assessed Value

Compound Annual Growth Rates

2008-2014 2015-2020

Residential -7.58% 6.75%

Commercial -2.40% 2.92%

All Other -2.11% -0.25%

Gross Digest -4.55% 3.83%

Net Digest M&O -5.93% 3.83%

Net Digest Bond -4.55% 3.83%

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0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 3. South Fulton SSD Net Digest, 2008-2020

Net Digest - M&O Net Digest - Bond

0

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 4. South Fulton SSD Property by Type, 2008-2020


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Appendix A. Fulton County Descriptive Statistics

Source: Author’s calculation, Georgia Department of Revenue Local Government Services, Property Tax

Consolidation sheets



Residential49%

Commercial41%

Industrial4%

Utility2%

Motor Vehicle4%

Other0%

Figure A1. Fulton County Property by Type, 2014

North Fulton42%

Atlanta45%

South Fulton13%

Figure A2. Fulton County Assessed Valuesby Location, 2014

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Residential60%

Commercial33%

Industrial1%

Utility1%

Motor Vehicle5%

Other0%

Figure A3. North Fulton Property by Type, 2014

Residential45%

Commercial46%

Industrial3%

Utility3%

Motor Vehicle3% Other

0%

Figure A4. Atlanta Property by Type, 2014

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Residential30%

Commercial46%

Industrial14%

Utility3%

Motor Vehicle6%

Other1%

South Fulton Property by Type, 2014

-0.2000

-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

06-07 07-08 08-09 09-10 10-11 11-12 12-13

Figure A6. Growth Rates of Residential Propertyby Location, 2006-2014

North Fulton Atlanta South Fulton

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-0.3000

-0.2000

-0.1000

0.0000

0.1000

0.2000

0.3000

0.4000

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14

Figure A7. Growth Rates of Commercial Propertyby Location, 2006-2014


-0.1500

-0.1000

-0.0500

0.0000

0.0500

0.1000

0.1500

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14

Figure A8. Growth Rates of Industrial Propertyby Location, 2006-2014


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-0.5000

0.0000

0.5000

1.0000

1.5000

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14

Figure A9. Growth Rates of Utility Property by Location, 2006-2014


-1.0000

-0.5000

0.0000

0.5000

1.0000

1.5000

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14

Figure A10. Growth Rates of Motor Vehiclesby Location, 2006-2014


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Appendix B. South Fulton Special Service District Descriptive Statistics



-0.6000

-0.4000

-0.2000

0.0000

0.2000

0.4000

0.6000

0.8000

1.0000

06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14

Figure A11. Growth Rates of Other Propertyby Location, 2006-2014


Residential38%

Commercial39%

Industrial14%

Utility4%

Motor Vehicles5%

Other0%

Figure B1. South Fulton SSD Property by Type, 2014

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1 Mitchell, J. and Hudson, K., Housing Starts End Year Solidly, up 4.4%, The Wall Street

Journal, January 21, 2015. 2 Matthews, C., 4 predictions for the housing market in 2015, Fortune, December 9, 2014. 3 Stynes, T., U.S. Fixed Mortgage Rates Fall in Latest Week – Freddie Mac, The Wall Street

Journal, January 15, 2015. 4 Kusisto, L., Economists See Housing Market Pickup, The Wall Street Journal, January 20,

2015. 5 Matthews, C., 4 predictions for the housing market in 2015, Fortune, December 9, 2014. 6 Matthews, C., How will cheap oil affect the housing market?, Fortune, January 8, 2015. 7 Dhawan, R., Forecast of Georgia and Atlanta, J. Mack Robinson College of Business:

Economic Forecasting Center, November 2014. 8 Seward, C., Strong home sales, prices mark metro Atlanta housing market, Atlanta Journal

Constitution, January 16, 2015. 9 Atlanta Regional Commission, Housing Market on the Upswing in Metro Atlanta, October 7,

2014.

-0.2000

-0.1500

-0.1000

-0.0500

0.0000

0.0500

08-09 09-10 10-11 11-12 12-13 13-14

Figure B2. South Fulton SSD Growth Rates by Property Type, 2008-2014


Documents

Fulton County Property Tax Base Forecast, 2015-2020...Fulton County Property Tax Base Forecast, 2015-2020 Prepared by the Center for State and Local Finance at Georgia State University